loans and credit

As this graphic illustrates, the United States government has a history of stepping in to help ensure companies it deems too big to fail remain solvent. Since 1970, the government has provided assistance to specific companies and industries to prevent a ripple effect throughout the economy. It is a costly practice, but one that has been more successful than not. However, it remains to be seen how its heightened activity in 2008 will fare.

U.S. Government Corporate Bailouts
1970 – 2008

In 2008, the United States government got heavily involved in the corporate world as it bailed out several corporations. Government leaders felt drastic measures were necessary in order to avoid another and more severe Great Depression. There were companies that it felt would cause catastrophic harm to the U.S. and global economy if they were allowed to fail. As this graphic illustrates, this was not the first time government leaders have felt inclined to get involved in corporate dealings, but it was an unusually active period.

The Railroad

In 1970, Penn Central Railroad approached the government looking for money to avoid bankruptcy. Within a year, the government came up with a plan to assist the railroad along with five others by combining them and loaning them $676 million. The transaction proved successful for all parties when, in 1987, the government sold the combined companies for $3.1 billion, collecting $579 million in dividends.

Lockheed

In 1971, Lockheed was the first recipient of funds through the Emergency Loan Guarantee Act. The company received loans totaling $1.4 billion. The bailout saved thousands of jobs for Californians and stabilized the defense contractor’s financial state. In addition to steadying the aerospace company, the government was repaid in full in 1977 and received $112 million in fees.

Franklin National Bank

After suffering through drastic losses in the first half of 1974, the government interceded, offering a loan of $1.75 billion. Unfortunately, the government should have investigated the bank before committing funds. It later discovered the bank was corrupt and had ties to the mafia. As a result, the government took ownership of the bank. Over the next five years, it sold off all bank assets for the sum of $5.1 billion.

Chrysler

Back in 1980, Chrysler appeared on the government bailout list for the first time. The government established the Chrysler Corporation Loan Guarantee Act to rescue the automaker from bankruptcy. Through the Act, the government backed the borrowing of $1.5 billion in loans to the trouble automaker. By 1983, the company had paid back all loans and purchased the warrants for 14.4 million shares of stock back from Uncle Sam for $311 million. While many observers considered the action a success, the fact that Chrysler would appear on the list two more times leaves the matter open for debate.

Continental Illinois National Bank & Trust Company

The government’s second foray into the banking industry occurred in 1984. Much like we’ve heard recently in the news, Continental Illinois was considered too big to be allowed to fail. In this case, the FDIC stepped in to rescue the bank, injecting $4.5 billion into the business and taking over 80% of the shares.

Majority ownership in the bank was returned to the public sector in 1991 at a loss of $1.8 billion to the U.S., making the government zero for two in the banking sector. The bank was sold to BankAmerica in 1994.

Savings & Loan

In the largest government intervention to date, $50 billion in taxpayer money was issued to the savings & loan industry through the Financial Institutions Reform, Recovery, and Enforcement Act of 1989. A plethora of savings & loan institutions had become insolvent and the money was necessary to prevent further collapse in the industry. Many institutions were closed and liquidated and increased restrictions were instituted across the industry to prevent further indiscretions.

Airline Industry

After the attacks on September 11, the entire airline industry was crippled with several airlines in danger of going bankrupt. Congress passed the Air Transportation Safety and System Stabilization Act, which gave the airlines $15 billion for mandatory grounding of planes, and defense against lawsuits resulting from the attacks.

Although one airline still went bankrupt at a cost of $23 million to the government, the Act was deemed a success. The purchase of airline stock at below-market value provided a profit to taxpayers as a result of the bailout.

2008

The year 2008 was by far the government’s most active and expensive year for corporate assistance. Fearing the greater depression, the government loaned out hundreds of billions of dollars to several corporations. It’s too early to tell whether it will prove to be a wise investment, though avoidance of a meltdown in the global economy seems to demonstrate it was at least partially successful.

In March, the Fed issued a $29 billion loan to assume the risk for the less liquid assets of Bear Stearns and insure the sale of the nearly 100-year-old company to JP Morgan for $236 million.

Next, the government prevented the collapse of the mortgage funding industry by promising finance giants Fannie Mae and Freddie Mac up to $100 billion each. Next up for rescue was American International Group, which had been the largest insurance group. Over three separate installments, the government distributed $150 billion in funds to the battered insurer. Additionally, the government took an 80% stake in the company with its final purchase of $40 billion in preferred shares.

To encourage the production of fuel-efficient vehicles and to boost sales, the Big 3 automakers, Chrysler, Ford, and General Motors, received $25 billion in bailouts in September.

In its biggest bailout in history, the government committed $351 billion to Citigroup. The government issued a $25 billion bailout, followed by the backing of $306 billion in loans and securities, topped with another $20 billion injection.

Chrysler has the dubious distinction of appearing on this list for a third time. Accompanied by General Motors, the automakers were granted an additional $13.4 billion, with another $4 billion available if necessary. Each company was given a strict three-month deadline to reduce costs and produce profits to repay the debt.

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Like overstretched American homeowners, governments and companies across the globe are groaning under the weight of debts.

Debt vs. GDP

Governments and companies around the world are going further and further into debt. The statistic used most often to evaluate this condition is the relationship between GDP and debt.

GDP is gross domestic product, which is sometimes called gross domestic income. The term refers to a measurement of a country’s economic production and includes the market value of final goods and services made in one year within the boundaries of that country.

GDP is calculated by summing up production of final goods for consumption, investment in assets, and government spending plus the difference of exports minus imports. The GDP report comes out at the end of each quarter.

The main idea is growth. If GDP is growing the economy is improving. Historically growth has averaged about 2.5-3% yearly, but it swings broadly from year to year.

Since every country is a different size and uses different currency, giving GDP as a number is somewhat meaningless. The comparison of debt to GDP creates a ratio that can be used to compare one nation to another.

First, considering public debt, the numbers are startling. Germany has long been the bastion of fiscal rectitude in Europe, and even there government debt is on the rise. The German government debt outstanding is expected to increase to the equivalent of 77 percent of the nation’s economic output next year from 60 percent in 2002. In Britain, that figure is expected to more than double over the same period, such that Britain’s debt will be more than 80% of GDP.

Ireland’s debt for 2010 is expected to rise to 70% of GDP, where it was 60% in 2007. Latvia, in northeastern Europe, has had a tremendous increase in debt from 9% in 2007 to what is expected to be 50% in 2010.

Corporate debt also surged over the last five years. $200 billion of corporate debt is coming due this year or next year. It is estimated that companies in Russia and the United Arab Emirates account for about half of that borrowing.

Corporate borrowing in Russia for the years 2006-2008 equaled $220 billion, which is 13% of GDP. Corporate debt in the Emirates for 2006-2008 was $135 billion, totaling 53% of the GDP. Corporate borrowing in Turkey for the years 2006-2008 equaled $72 billion, which is 10% of GDP. Corporate debt in the Kazakhstan for 2006-2008 was $44 billion, totaling 44% of the GDP.

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Breakdown by U.S. state of the highest and lowest tax rates for gasoline, cigarettes, sales and booze.

State Taxes in America

One of the factors that makes the cost of living vary from state to state in the U.S. is taxes. Each state sets the tax rate for many types of taxes and quite a bit of information is available on the Internet. Tax Foundation is an organization whose purpose is educating taxpayers. Further information can be found on their website at Taxfoundation.org

As reported by the Tax Foundation:

There is no sales tax charged in Oregon. Montana also charges zero sales tax.  There is no sales tax charged in New Hampshire. Alaska is the fourth state that charges zero sales tax.

Colorado sales tax is 2.9%. Oklahoma sales tax is less than or equal to 4%. North Carolina also charges 4% or less for sales tax. Georgia and Alabama both have 4.00% sales tax. Missouri charges sales tax equaling or less than 4%. New York sales tax is under 4%, whereas Delaware charges only 2.07%. Sales tax in Louisiana is also less than or equal to 4%, as is the sales tax in Wyoming. South Dakota and New Mexico also have less than or equal to 4% sales tax.

The sales tax in North Dakota is between 4 and 5%. Nebraska charges 4-5% sales tax. Both Kansas and Utah have sales tax rates between 4 and 5%. Sales tax in Arizona is between 4 and 5 percent, as is the sales tax in Wisconsin and Maine. Ohio and Virginia round out the list of states charging 4 to 5% sales tax.

The states of Washington and Idaho in the Pacific Northwest charge between 6 and 7% sales tax. Nevada and Texas both charge between 6 and 7% sales tax. Minnesota charges between 6 and 7% sales tax. The sales tax charged in Iowa and Arkansas is between 6 and 7%. Illinois and Kentucky charge between 6 and 7% sales tax. The sales tax rate in West Virginia and Pennsylvania is between 6 and 7%. Maryland and Vermont both charge sales tax between 6 and 7%. Connecticut and Massachusetts in the Northeast charge between 6 and 7% sales tax, along with Florida in the Southeast. Michigan has a sales tax rate between 6 and 7%. South Dakota also charges between 6 and 7% sales tax.

California tops the sales tax chart, charging 8.25%. Indiana also charges 7% or more. New Jersey charges 7% sales tax. Rhode Island has a sales tax rate of 7%. Missouri charges 7% sales tax. Tennessee also has a sales tax rate of 7%.

Cigarettes are a highly taxed commodity, with special taxes added into the price before sales tax is even added on. Here are the ten highest-taxing states: Rhode Island has the highest cigarette tax at $3.46 per pack. Cigarettes in New York are taxed at $2.75. New Jersey charges a tax of $2.70 per pack on cigarettes. The cigarette tax in Hawaii is $2.60. Cigarettes in Wisconsin are taxed at $2.52. Massachusetts charges a tax of $2.51 per pack on cigarettes. The cigarette tax in Vermont is $2.24. Cigarettes in Washington are taxed at $2.02. Michigan charges a tax of $2.00 per pack on cigarettes. The cigarette tax in Maryland is $2.00.

Conversely, the additional tax is much lower in some states. The ten lowest cigarette tax rates follow. The lowest cigarette tax in the nation is in South Carolina, with a tax rate of $0.07. Cigarettes in Missouri are taxed at $0.17. Virginia charges a tax of $0.30 per pack on cigarettes. The cigarette tax in North Carolina is $0.35. Cigarettes in Louisiana are taxed at $0.36. Georgia charges a tax of $0.37 per pack on cigarettes. The cigarette tax in Alabama is $0.425. Cigarettes in North Dakota are taxed at $0.44. West Virginia charges a tax of $0.55 per pack on cigarettes. The cigarette tax in Idaho is $0.57.

Gasoline is also taxed specially, with the tax being included in the price shown at the pump. The 10 highest and lowest taxing states for gasoline charge these rates: Alaska has the lowest gasoline tax at about 8 cents per gallon. Georgia charges 12 cents per gallon tax on gasoline. The tax on gasoline is 15 cents in Wyoming, New Jersey, and South Carolina. 18 cents per gallon is charged on gasoline in Oklahoma, Missouri, Mississippi, New Mexico, and Arizona.

The highest taxes added on to gasoline top out in New York at 44 cents per gallon. Pennsylvania, Wisconsin, and Nevada charge 31 cents per gallon tax on gasoline. Hawaii charges 32 cents per gallon tax on gasoline. The tax on gasoline is 33 cents in Illinois. 35 cents per gallon is charged on gasoline in Florida, Connecticut, and Washington. California has a gasoline tax of 38 cents per gallon.

Spirits are also highly taxed, with the highest being fairly shocking. Washington State adds a tax of $26.45 per gallon, whereas the lowest tax on spirits is $0.68 per gallon in Vermont. The remaining nine highest tax rates on spirits are as follows: Michigan charges $10.91 per gallon on spirits. The tax on one gallon of spirits in Idaho is $10.96. The spirits tax in Utah is 11.41 per gallon. In Iowa, the tax on one gallon of spirits is $12.47. Alaska charges $12.80 per gallon on spirits. The tax on one gallon of spirits in North Carolina is $13.39. The spirits tax in Alabama is 18.78 per gallon. In Virginia, the tax on one gallon of spirits is $20.13. The tax on one gallon of spirits in Oregon is $24.63.

The remaining nine lowest taxing states are as follows: Washington, DC charges $1.50 per gallon on spirits. The tax on one gallon of spirits in Maryland is $1.50. The spirits tax in West Virginia is 1.85 per gallon. In Missouri the tax on one gallon of spirits is $2.00. Colorado charges $2.28 per gallon on spirits. The tax on one gallon of spirits in Texas is $2.40. The spirits tax in Kansas, Louisiana, and North Dakota is $2.50.

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Which form of plastic is more popular with American consumers? There are currently 576,400,000 credit cards in the United States versus 507,000,000 debit cards, so credit cards clearly have the upper hand. Among 2010 credit cards, 270.1 million are Visa (down 11% from 2008), 203 million are MasterCard (down 22% from 2008), 48.9 million are American Express (down 9% from 2008) and 54.4 million are Discovery (down 6% from 2008). Among 2010 debit cards, 382 million are Visa (up 18% from 2008) and 125 million are MasterCard (up 1% from 2008).

In a 2009 credit card satisfaction survey, the following credit cards ranked highest in customer satisfaction and popularity:

• American Express, with a credit card satisfaction rank of 762 out of 1000;
• Discover Card, with a credit card satisfaction rank of 751 out of 1000;
• National City, with a credit card satisfaction rank of 740 out of 1000;
• Wells Fargo, with a credit card satisfaction rank of 724 out of 1000;
• Barclaycard, with a credit card satisfaction rank of 717 out of 1000;
• US Bank, with a credit card satisfaction rank of 715 out of 1000;
• Chase, with a credit card satisfaction rank of 708 out of 1000;
• Citi, with a credit card satisfaction rank of 699 out of 1000;
• First National Bank of Omaha, with a credit card satisfaction rank of 689 out of 1000;
• Bank of America, with a credit card satisfaction rank of 687 out of 1000.

The birth of the credit card industry occurred in 1958, when the first widely accepted form of plastic was issued by American Express. This was followed by the first general-use credit card that allowed balances to be paid out over time, BankAmericard (later changed to Visa in 1977) in 1959. MasterCard began in 1966, when a number of banks formed the Interbank Card Association. This association bought the rights to use the name “Master Charge” from the California Bank Association in 1969; then renamed it MasterCard in 1977.

Though credit cards remain the dominant form of plastic in America, debit cards have gained popularity, especially as a form of online payment. However, that growth is expected to stagnate at around 27%. Here is a forecast for the volume of dollars expected to be traded through debit cards, and the percent of online shopping it constitutes:

• In 2008, $47 billion dollars was traded through debit cards, which is 26% of online shopping;
• In 2009, $57 billion dollars was traded through debit cards, which is 28% of online shopping;
• In 2010, $67 billion dollars will be traded through debit cards, which is 28% of online shopping;
• In 2011, $81 billion dollars will be traded through debit cards, which is 28% of online shopping;
• In 2012, $47 billion dollars will be traded through debit cards, which is 27% of online shopping;
• In 2013, $98 billion dollars will be traded through debit cards, which is 26% of online shopping;
• In 2014, $105 billion dollars will be traded through debit cards, which is 26% of online shopping.

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According to data compiled during the 3^rd and 4^th financial quarters of 2009, China outranks every other country in the world in terms of a positive international trade balance. Close on China’s heels, Germany, Saudi Arabia, and Japan also showed healthy positive international trade balances. The figures were smaller for Norway, Russia, South Korea, Switzerland, Taiwan, the Netherlands, and Sweden, but they also showed positive international trade balances. Rounding out the list, Hong Kong, Singapore, Thailand, Denmark, Argentina, Austria, Israel, and Chile also showed positive international trade balances.

According to the 3^rd and 4^th quarter 2009 financial data, the United States led all other countries in the world with a negative international trade imbalance. Next in line were Spain, Italy, France, and Greece, with large negative international trade imbalances. Canada, Australia, India, the UK and Brazil also showed negative international trade imbalances. Rounding out the list, Turkey, South Africa, Mexico, Columbia, Poland, Pakistan, Egypt, Belgium, Hungary, and the Czech Republic showed negative international trade imbalances as well.

The negative international trade imbalances only tell part of the story; it’s also important to consider the percentage of the trade balance that is also part of the GDP. In that case, Greece leads the list with a negative trade balance of 36.8 billion, or 12.4% of the GDP. Spain is next at a negative trade balance of 82.1 billion, or 5.7% of the GDP; followed by South Africa at 12.0 billion, or 5.3% of the GDP. Among the rest of countries with negative trade imbalances, the numbers are as follows:

• Australia at a negative trade balance of 32.7 billion, or 3.7% of the GDP;
• US at a negative trade balance of 465.3 billion, or 3.0% of the GDP;
• Italy at a negative trade balance of 74.1 billion, or 2.9% of the GDP;
• Canada at a negative trade balance of 34.8 billion, or 2.7% of the GDP;
• Hungary at a negative trade balance of 2.1 billion, or 2.6% of the GDP;
• Columbia at a negative trade balance of 6.1 billion, or 2.6% of the GDP; and
• France at a negative trade balance of 56.7 billion, or 2.0% of the GDP.

It’s also important to consider the percentage of the GDP when looking at countries with a positive international trade balance. In that case, Norway leads the pack, with a positive international trade balance of 58.4 billion, or 15.8% of the GDP. This is followed by Malaysia, with a positive international trade balance of 32.3 billion, or 15.5% of the GDP; and Hong Kong, with a positive international trade balance of 26.2 billion, or 13.7% of the GDP. Among other countries with a positive international trade balance, the breakdown is as follows:

• Singapore at a positive international trade balance of 20.9 billion, or 12.7% of the GDP;
• Switzerland at a positive international trade balance of 42.4 billion, or 7.7% of the GDP;
• Taiwan at a positive international trade balance of 38.6 billion, or 7.6% of the GDP;
• Sweden at a positive international trade balance of 33.0 billion, or 7.4% of the GDP;
• Thailand at a positive international trade balance of 19.9 billion, or 6.6% of the GDP;
• China at a positive international trade balance of 364.4 billion, or 6.3% of the GDP; and
• Netherlands at a positive international trade balance of 34.8 billion, or 5.4% of the GDP.

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Is the US economy feeling better? Track state and nationwide changes in unemployment rates, jobs by industry, and foreclosure facts for 2009

Unemployment rates rose from 2008 to 2009, with the overall unemployment rate rising from 7.3% to a record high of 10%. The increase in unemployment is tied to almost every industry in the country, and because more and more consumers are losing their jobs, foreclosure rates are also on the rise.

Overall foreclosure rates have risen 0.035% from November 2008 to November 2009. Nevada has the highest foreclosure rate–but managed to bring that number down 0.476% from ’08 to ’09–the biggest rate change in the country.

Unemployment rates have increased in Nevada from 8.4% in 2008 to 12.3% in 2009. An increase in unemployment has been tracked in every state in the union from 2008 to 2009:

• In Alabama, unemployment rates have increased from 6.5% in 2008 to 10.5% in 2009;
• In Alaska, unemployment rates have increased from 6.8% in 2008 to 8.7% in 2009;
• In Arizona, unemployment rates have increased from 6.6% in 2008 to 8.9% in 2009;
• In Arkansas, unemployment rates have increased from 5.7% in 2008 to 7.4% in 2009;
• In California, unemployment rates have increased from 8.7% in 2008 to 12.3% in 2009;
• In Colorado, unemployment rates have increased from 5.8% in 2008 to 6.9% in 2009;
• In Connecticut, unemployment rates have increased from 6.6% in 2008 to 8.2 % in 2009;
• In Delaware, unemployment rates have increased from 5.7% in 2008 to 8.5% in 2009;
• In District of Columbia, unemployment rates have increased from 5.7% in 2008 to 11.8% in 2009
• In Florida, unemployment rates have increased from  7.6% in 2008 to 11.5% in 2009;
• In Georgia, unemployment rates have increased from 7.5% in 2008 to 11.2% in 2009;
• In Hawaii, unemployment rates have increased from 5.1% in 2008 to 7.0% in 2009;
• In Idaho, unemployment rates have increased from 6.1% in 2008 to 9.1 % in 2009;
• In Illinois, unemployment rates have increased from 7.2% in 2008 to 10.9 % in 2009;
• In Indiana, unemployment rates have increased from 7.8% in 2008 to 9.6% in 2009;
• In Iowa, unemployment rates have increased from 4.4% in 2008 to 6.7% in 2009
• In Kansas, unemployment rates have increased from 5.0% in 2008 to 6.3% in 2009;
• In Kentucky, unemployment rates have increased from 7.6% in 2008 to 10.6% in 2009;
• In Louisiana, unemployment rates have increased from 5.5% in 2008 to 10.9% in 2009;
• In Maine, unemployment rates have increased from 6.5% in 2008 to 8.0% in 2009;
• In Maryland, unemployment rates have increased from 5.4% in 2008 to 7.4% in 2009;
• In Massachusetts, unemployment rates have increased from 6.4 % in 2008 to 8.8% in 2009;
• In Michigan, unemployment rates have increased from 10.2% in 2008 to 14.7% in 2009;
• In Minnesota, unemployment rates have increased from 6.6% in 2008 to 7.4% in 2009;
• In Mississippi, unemployment rates have increased from 7.8% in 2008 to 9.6% in 2009;
• In Missouri, unemployment rates have increased from 7.1% in 2008 to 9.5% in 2009;
• In Montana, unemployment rates have increased from 5.0% in 2008 to 6.4% in 2009;
• In Nebraska, unemployment rates have increased from 3.9% in 2008 to 4.5% in 2009;
• In Nevada, unemployment rates have increased from 8.4% in 2008 to 12.3% in 2009;
• In New Hampshire, unemployment rates have increased from 4.3% in 2008 to 6.7% in 2009;
• In New Jersey, unemployment rates have increased from 6.8% in 2008 to 9.7% in 2009;
• In New Mexico, unemployment rates have increased from 4.7% in 2008 to 7.8% in 2009;
• In New York, unemployment rates have increased from 6.6% in 2008 to 8.6% in 2009;
• In North Carolina, unemployment rates have increased from 8.1% in 2008 to 10.8% in 2009;
• In North Dakota, unemployment rates have increased from 3.3% in 2008 to 4.1% in 2009;
• In Ohio, unemployment rates have increased from 7.4% in 2008 to 10.6% in 2009;
• In Oklahoma, unemployment rates have increased from 4.6% in 2008 to 7.0% in 2009;
• In Oregon, unemployment rates have increased from 8.3% in 2008 to 11.1% in 2009;
• In Pennsylvania, unemployment rates have increased from 6.4% in 2008 to 8.5% in 2009;
• In Rhode Island, unemployment rates have increased from 9.4% in 2008 to 12.7% in 2009;
• In South Carolina, unemployment rates have increased from 8.8% in 2008 to 12.3% in 2009;
• In South Dakota, unemployment rates have increased from 3.7% in 2008 to 5.0% in 2009;
• In Tennessee, unemployment rates have increased from 7.6% in 2008 to  10.3% in 2009;
• In Texas, unemployment rates have increased from 5.6% in 2008 to 8.0% in 2009;
• In Utah, unemployment rates have increased from 4.1% in 2008 to 6.3% in 2009
• In Vermont, unemployment rates have increased from 5.9% in 2008 to 6.4% in 2009
• In Virginia, unemployment rates have increased from 5.0% in 2008 to 6.6% in 2009;
• In Washington, unemployment rates have increased from 6.5% in 2008 to 9.2% in 2009;
• In West Virginia, unemployment rates have increased from 4.5% in 2008 to 8.4% in 2009;
• In Wisconsin, unemployment rates have increased from 5.9% in 2008 to 8.2% in 2009; and
• In Wyoming, from 3.2% in 2008 to 7.2 % in 2009.

Almost all industries in the United States have reported a decrease nationally since 2008, averaging 3.5%. Construction has seen a 12.7% decline. Manufacturing has seen a decline of 10.2%. Retail trade has decreased by 3.2%. Financial activities have decreased by 4.3%. Leisure and hospitality is down by 1.2%. Even the government is down by 0.1%. The one industry that has seen an increase in employment is education and health services, which are up by 2.2%.

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Learn to live with less. Learn to shun envy. Appreciate what you have. If you have less, you will appreciate what you have more.

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10 Lies That Landed You in Credit Card Debt

No matter how much most of us try to avoid the temptation to purchase items we really don’t need, we don’t always succeed. We seem to come up with more creative ways to justify making purchases we really shouldn’t. Worse, many individuals fail so frequently and become such adept liars, they find themselves in credit card debt. This illustration lists 10 lies that land people in debt as well as the truths that would keep people out of debt.

# 1 Lie: It’s an emergency!

Truth: If a life isn’t at stake, it probably isn’t a real emergency.

Other than life’s basic necessities, including food, clothes, and shelter (that doesn’t mean lobster, Prada, and a mansion either), there is most likely no emergency that requires you to purchase something.

#2 Lie: We deserve it!

Truth: You don’t deserve to pay interest on your reward, do you?

Look, we all deserve to have nice things and should be able to buy things we don’t necessarily need. However, getting temporary satisfaction from purchasing something isn’t worth the long-term stress of accumulating credit card debt. Limit splurges and pay cash to avoid mounting credit card debt.

#3 Lie: It’s a bargain!

Truth: Great deals come and go. It’s not a bargain after the interest payments.

These days, you should have no trouble finding bargains. Even when times are good, businesses mark down merchandise constantly to reduce inventory levels. Don’t buy unless you have the money on hand and it’s something you actually need.

#4 Lie: It’s not much money.

Truth: Over time, enough small charges on the card can grow into a mountain of debt.

Thanks to the magic of compounding interest, those small purchases quickly grow up to become expensive purchases and you end up paying much more than the item is worth.

#5 Lie: The payment is small.

Truth: Remember, the payment may be small and manageable at first, but buy enough on credit and the payments grow substantially. On top of that, you still have to pay back the borrowed amount with interest.

Again, the initial purchase may not be that expensive. But when you add up all the small expenses and add in the money you’re paying in interest, you end up paying a lot of money and getting little in return.

#6 Lie: The card rewards make it worth it.

Truth: But if the allure of these rewards is putting you deeper and deeper into debt, they just aren’t worth it.

Rewards from credit card purchases are very attractive and make consumers use their cards more frequently. That’s the only reason credit card companies offer rewards. However, once interest is factored in, you end up paying more for those rewards than they’re worth.

#7 Lie: Offers of 0% APR on purchases

Truth: Once you’re hooked, prices go up, way up. Once the 0% APR introductory rate expires, interest rates can easily soar into the double digits.

This is yet another way credit card companies convince consumers to use their cards. They prey on shortsighted consumers who see only the money they’ll save up front, not realizing they’ll pay huge sums in the near future.

#8 Lie: Offers of 0% APR on balance transfers

Truth: Balance-transfer-offers can be great, but just like the 0% APR purchase offers, make sure you pay off the debt before the 0% APR offer expires.

This is how credit card companies convince you to switch to their card. However, unless you pay off the balance quickly, the APR will skyrocket.

#9 Lie: It’s for my business.

Truth: All small-business owners have to decide for themselves, of course, just how necessary an expense is, but with business credit cards, it can be easy to spend more than you should.

When you own your own business, it’s easy to justify spending more money than you have on hand to help your business grow. However, unless you have a strategy for paying off the debt quickly, your business will be out of business.

# 10 Lie: I’ll pay it off after graduation.

Truth: Do you really want to start out in the workforce in the hole?

College students are known for their lack of financial resources, making them ideal targets for credit card companies. It’s easy for college students to justify purchases by convincing themselves they’ll pay them off as soon as they get their first job. Unfortunately, it’s usually not that easy. The interest grows quickly and it becomes difficult to pay off the debt when the interest continues to accumulate.

Don’t help the credit card companies take more of your money by telling yourself these lies. Instead, practice discipline and purchase only the things you need and can afford to pay for at the time of purchase.

Based on standard FICO criteria, we were shocked to learn that the U.S. credit score was…

Calculation of the United States Credit Score

Everyone realizes the significance of monitoring their credit score and ensuring it’s as high as possible, especially with the immense scrutiny of lenders these days. At the same time, we have also heard on numerous occasions about the government’s enormous debt levels, which have grown at an accelerated rate as a result of efforts to get the economy back on track. Now, we have this interesting graphic, which shows what the credit score of the U.S. government would be and how its debt levels affect the score. The pie chart details the various factors that go into calculating the FICO score and the percentage weight of each factor.

Things get off to a good start as the United States benefits from its payment history, which accounts for 35% of the FICO score. The country has had an impeccable loan repayment record for over 200 years. It has never missed a payment or shirked a creditor, whom Uncle Sam pays when they cash in treasury securities. Despite the country’s mounting debt, there is virtually no concern about its ability to continue paying off its debts. Unfortunately, higher taxes will likely be required in order to maintain that perfect streak.

Credit history accounts for 15% of the FICO score and America’s history, which dates back to the Revolutionary War, assures lenders that there is little risk in letting the country borrow money. This section of the illustration also includes a chart depicting debt as a percentage of GDP throughout history. Unfortunately, we’re currently approaching levels not seen in approximately 70 years.

That chart is followed by the country’s debt level, which accounts for 30% of its FICO score. This is where the score is impacted negatively. At the time the image was created, the United States had a debt level totaling $11,804,316,400,237. Yep, that’s nearly $12 trillion and it’s still climbing. That translates to $38,396 per citizen, including children. Ouch!

The next section details the types of credit used, which accounts for 10% of the FICO score. Boosting its credit score, is the fact that the U.S. has borrowed using a variety of credit types, including notes, bonds, and other securities. However, pulling the score down is the fact that it owes millions of different creditors. Topping the list of securities held by the public is notes with a total of $2.79 trillion. That’s followed by bills at $1.86 trillion and bonds at $591.8 billion.

The government loves to borrow from the Federal Old Age and Survivors Insurance Trust Fund, which is the top creditor and is owed $2.2 trillion. Next in line for payment is China to whom America owes $739.6 billion. The Federal Employees Retirement Funds will need to be replenished to the tune of $738 billion. The Federal Savings and Loan Corporation, Resolution Fund is owed $689 billion. Japan has loaned $634.8 billion and the Foreign Oil Exporters are expecting to receive $186.3 billion in repayment.

New Credit / Inquiries accounts for 10% of the FICO score. Unfortunately, the government has taken out trillions of dollars in new credit recently. As of the date the data was compiled, the U.S. had increased debt in 2009 by an astounding $1.2 trillion. That’s after an increase of approximately $1 trillion in 2008.

All this data leads to an approximate credit score for the United States of 620. As you can see on the chart, that is just barely in the “Fair” category. Based on increasing debt levels, an update of this graphic would likely show the score has currently dipped into the “Poor” category. Unfortunately, unlike the rest of us, Uncle Sam will be allowed to continue borrowing despite the disappointing credit score.

For the first nine months of 2009, bankruptcy filings reached 1.07 million; this number is expected to reach 1.4 million by the end of the year.

Bankrupt in America

This image depicts just how horrible the first half of 2009 was for a large portion of the country. The map contains a color for each state, representing the change in the number of bankruptcy filings for the first and second quarters in 2006 and 2009. The image then highlights the darkest shaded states, which are those that reported an increase in bankruptcy filings of 20,000 or more, and provides the specific number of filings.

According to the graphic, there were 10 states where bankruptcy filings increased by 20,000 or more in the first half of 2009. The best of the worst was Texas, where filings increased 67% from 15,766 in 2006 to 26,271 in 2009. Next, was Tennessee where filings jumped 85% from 14,481 to 26,784.

Now, we get to the states that saw bankruptcies double from 2006 levels. In Georgia, bankruptcies grew 100% from 18,225 to 36,532. New Yorkers suffered through a 121% increase in filings, growing from 13,082 to 28,954.

Many mid-western states endured the dismal economy together. Ohio reported an increase of 143% with 34,815 bankruptcies in 2009 compared to 15,023 three years earlier. Michigan, home to the Big 3 automakers, witnessed a 144% jump as filings increased from 14,675 to 35,800. Times were even tougher in Indiana where 24,096 individuals filed for bankruptcy, an increase of 148% from the 9,689 filings in 2006. Illinois suffered through the largest percentage increase among the mid-western states. In the first two quarters of 2009, bankruptcies soared 161% to 35,902 from 13,744 in the first half of 2006.

Unfortunately for Floridians, bankruptcy filings in Florida increased 307% from 11,339 to 46,116 in just three years. Surprisingly, one state saw its filings increase even more. In California, bankruptcies skyrocketed 493%, to a dismal 96,497 filings from a manageable 16,247 in the first two quarters of 2006.

The illustration also contains a table in which the bankruptcies per capita are ranked by state. It displays the 10 states with the highest number of bankruptcies per capita and the 10 states with the lowest number. I suppose Californians should feel somewhat better as they do not appear on the list. However, it appears most people in Nevada are struggling to make ends meet. In the state, for every 1,000 citizens, 11.24 filed for bankruptcy. That easily tops runner-up, Tennessee with 8.72 filings per 1,000 individuals. While there may not be a plethora of people living in Alaska, those who do appear to be financially savvy. A mere 1.38 out of every 1,000 Alaskans has filed for bankruptcy. The District of Columbia is runner-up with 1.96 filings per 1,000 citizens.

Finally, there are a couple of fast facts, which further emphasize the bleak situation. In an effort to update the miserable data, the image notes that between May and September, nearly 6,000 bankruptcies were filed nationwide per day. Additionally, for the first nine months of 2009, bankruptcy filings reached 1.07 million and the number was expected to reach 1.4 million by year’s end.

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This map depicts 16 of world’s largest stock exchanges.

World Stock Exchanges

Of the approximately 100 major exchanges located throughout the world, 16 of the world’s largest stock exchanges are depicted on the above image. The map also shows the market value and share turnover of each exchange. Share turnover is defined as a measure of stock liquidity. The market value is represented by buildings, with each large building equivalent to approximately $2 trillion.

As the picture shows, the United States has two of the top three exchanges based on market value. The New York Stock Exchange is the largest exchange by far with a market value of $9.57 trillion and share turnover of $7.99 trillion. The NYSE combined with the NASDAQ exchange, which has a market value of $2.77 trillion and a chart topping share turnover of $12.26 trillion, enables the U.S. to account for 38% of the total market value of the exchanges represented on this graphic.

Not surprisingly, Europe has several of the world’s largest exchanges. Of those European exchanges, the Euronext is the largest with a market value of $2.26 trillion and has share turnover of $743 billion. That exchange is followed closely by the London Stock Exchange, which has a market value of $2.2 trillion and share turnover of $1.48 trillion. The Frankfurt Stock Exchange has a market value of $1.13 trillion and share turnover of $1.1 trillion. Next, is the Madrid Stock Exchange with a market value of $1.08 trillion and share turnover of $591 billion. Finally, the Swiss Exchange has a market value of $854 billion with share turnover of $202 billion.

Back in the Americas, the Toronto Stock Exchange has a market value of $1.35 trillion and share turnover of $491 million. Down south, the Sao Paolo Stock Exchange in Brazil comes in with a market value of $920 billion and share turnover of $192 billion.

Africa is represented by the Johannesburg Securities Exchange, which has a market value of $605 billion and share turnover of $117 billion. Meanwhile, two Indian exchanges appear on the illustration. The Bombay Stock Exchange has a total market value of $1.03 trillion with share turnover of $84 billion. The National Stock Exchange of India has a market value of $969 billion and share turnover of $243 billion.

The Australian Securities Exchange has a market value of $839 billion and share turnover of $273 billion. Asia has three of the larger exchanges in the world. The Hong Kong Stock Exchange has a market value of $1.77 trillion and share turnover of $519 billion. The Shanghai Stock Exchange is larger with a market value of $2.07 trillion and share turnover of $1.69 trillion. Finally, the Tokyo Stock Exchange is second only to the New York Stock Exchange with a market value of $3.1 trillion and share turnover of $1.56 trillion.

Trillions of dollars and fortunes have been made and lost on these major exchanges. Unfortunately, billions have been lost since the recession started. Hopefully, that trend will reverse and more money will be made.